In many Indian households, money moves freely within the family. Parents help children, siblings support each other, and relatives often step in during milestones like weddings or home purchases. Most people assume such gifts are tax-free. The Income Tax Act, however, looks at family very differently.
CA (Dr) Suresh Surana explains that the law does not use the word family at all when deciding on gift tax exemption.
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“For the purpose of determining whether a gift is exempt from tax, the Income-tax Act does not use the term ‘family’. Instead, the exemption is strictly linked to whether the donor qualifies as a ‘relative’ under Section 56(2)(x),” he says.
Understanding who qualifies, and who does not, is essential to avoid unwanted tax notices.
THE LAW'S NARROW CIRCLE OF ‘RELATIVES’
Under Section 56(2)(x), gifts received from a relative are fully exempt from tax, regar
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